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S27Prep
Reserve Calculations
| Question | Answer |
|---|---|
| ustomer reserve computation frequency? | Weekly for most carrying broker-dealers |
| Reserve computation based on what rule? | SEC Rule 15c3-3 |
| Reserve deposit due when? | No later than 1 hour after bank opens on 2nd business day after computation |
| Reserve deficiency notification timing? | Within 24 hours |
| If reserve requirement decreases | excess funds may be withdrawn when? |
| Bank account title requirement? | Special Reserve Bank Account for the Exclusive Benefit of Customers |
| Reserve account must be segregated from what? | Firm’s proprietary funds |
| Reserve deposit must be made in what form? | Cash or qualified securities |
| Are proprietary accounts included in reserve formula? | No; only customer-related credits and debits |
| Fail to make required reserve deposit – operational consequence? | Immediate corrective action required |
| Fail to make required reserve deposit – reporting timing? | Notify within 24 hours |
| Reserve computation date typically? | As of close of business Friday |
| When is weekly reserve deposit typically due? | Following Tuesday morning within 1 hour of bank opening |
| Qualified securities haircut applied in reserve account? | Yes |
| Customer fully paid securities must be kept where? | In possession or control |
| Possession or control deficiency notification timing? | Within 24 hours |
| Reserve formula memory hook? | Compute Friday; fund by Tuesday 1-hour rule |
| Customer credits in reserve formula represent what? | Amounts owed to customers |
| Customer debits in reserve formula represent what? | Amounts owed by customers |
| If credits exceed debits in formula? | Firm must deposit difference into reserve account |
| Customer reserve deficiency vs net capital deficiency – which is faster? | Both require 24-hour notification; net capital also requires immediate business halt |
| Fail to maintain possession or control vs reserve deficit – timing? | Both require 24-hour notification |
| Net capital below minimum – first action? | Cease doing business immediately |
| Reserve deposit missed – first action? | Immediately fund deficiency |
| Qualified securities in reserve account valued at what? | Market value less applicable haircut |
| Can firm use customer reserve funds for operations? | No; exclusive benefit of customers only |
| Customer fully paid securities location requirement? | Must be in possession or control of the firm |
| Excess reserve funds withdrawal allowed when? | After computation confirms excess exists |
| Reserve formula credits represent what? | Liabilities owed to customers |
| Reserve formula debits represent what? | Customer obligations to the firm |
| If debits exceed credits in reserve formula? | No deposit required; firm has excess debits |
| If credits exceed debits? | Deposit difference into reserve account |
| Net capital computation must reflect box count differences when? | Within 7 business days |
| Material inadequacy vs capital deficiency – longer reporting window? | Material inadequacy: 30 days; capital: 24 hours |
| Aggregate indebtedness 1 | 200% trigger belongs to which bucket? |
| Tentative net capital early warning (Appendix E) – timing? | Notify within 24 hours |
| Failure to segregate customer securities – reporting timing? | Within 24 hours |
| Reserve computation typically performed as of what day? | Friday close of business |
| Reserve funding deadline memory? | 2nd business day plus 1 hour after bank opens |
| Capital crisis memory rule? | If capital shakes |
Created by:
sjameve
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